Costa Rica’s dairy industry dodged a bullet in negotiations with the
European Union, but Central America overall was made to accept 1,900
tons of powdered milk. The subject was a serious sticking point to the
free trade agreement.

Only 200 tons of dry milk powder per year will be allowed duty-free
into Costa Rica, where the dairy industry is much more advanced than
elsewhere and was able to defend its interests. But the local company
Dos Pinos will be hit in its ongoing efforts to expand to Guatemala and
the other Central American countries.

The local industry hides behind an import tariff of 65 percent for milk
products. That will make exports from Europe competitive in spite of
high production costs there. The northern Central American
countries have tariffs of 15 percent on powdered milk, while Panama’s
are higher. Imports from both Costa Rica and outside the region (New
Zealand, United States) are already a factor in the poorer countries,
but duty-free treatment of the negotiated amount will make Europe more
competitive.

Costa Rica is also obliged to allow duty-free 317 tons of hard cheeses.
Aside from the obvious possibility that the dry milk might be used to
make cheese, those imports should be a lesser impact of imports on
small-scale dairy producers in Central America, who largely produce and
sell fresh cheese. Given the high prices of aged cheese in Costa Rica,
the few local producers, like Monteverde, are facing a reduction in
sales.

Negotiators did manage to repel export subsidies. Exports of milk,
cheese, and butter are heavily supported through the European Union’s
Common Agricultural Policy. Subsidies take the form of a “refund” which
is paid to the processor (not the farmer) who exports milk or cheese at
a rate less than the internal EU market price, which is itself
artificially high due to import tariffs. These can be dumped at the
world market forcing those prices down. Overall the policy costs the
European taxpayer about 55 billion euros per year in direct subsidies,
or 100 euros per person. About one billion of that is for dairy.

Other advanced countries including the United States have

generous
subsidies for farmers, and that was an issue during negotiations on the
Central American Free Trade Agreement with the U.S. Quotas on imports
of dry milk and cheese are actually rather similar to what was conceded
to the Europeans. Eventually the U.S. free trade treaty requires total
elimination of import restrictions and duties, but over a 20-year term
for milk.

Powdered milk as a commodity can end up anywhere, and one of the main
destinations from the United Kingdom in 2006 was Nigeria, according to
FarmSubsidy.org, a watchdog organization. In many places like south
Asian countries or Africa, investment in a single cow can be a way out
of poverty. Cheap foreign milk, while benefiting the consumer, tends to
destroy dairy production when it arrives.

Central America is wealthier, but most milk production in the region
outside Costa Rica qualifies as small-scale, with hand milking and
usually cheese made on the site for easier transport and storage. In
other countries such as El Salvador, farmers and consumers contend with
issues such as smuggling, contamination, and extortion not known here.

Costa Rica has a relatively advanced dairy sector, with about 60
percent of total production given industrial treatment, according to
figures from the Cámera Nacional de Productores de Leche. The remainder
is made into cheese, natilla, or sold as raw milk locally.

Most dairy farms are in the cooler areas of the Central and Tilarán
mountain ranges, with Holstein about 65 percent and Jersey 30 percent
of milk cows. In 2000, at the time of the last census, there were about
162,000 head though that number has declined with increases in
production per cow.

There were about 6,000 specialized farms.

The market for milk products is dominated by Dos Pinos, which places
its products in even the most remote towns and smallest pulperías. In
addition to milk products, it has a substantial line of sugared drinks
and juices.

Dos Pinos didn’t respond to requests for up-to-date information but it
has 80-85 percent of the market for industrialized production and
packages about a million liters of milk per day. Of that, about 20
percent is presently exported to Central America and the Caribbean.

U.S.
Embassy photo

U.S. Secretary of Commerce Carlos M. Gutierrez
checks out the produce at
Hortifruti/Wal-Mart Oct. 1, 2008. Gutierrez was in the
country with a group of
U.S. business executives looking for trade possibilities.

Agriculture opportunities at a
glance

According to the U.S. government
under the Central American Free Trade Treaty:

· More than half of current U.S. farm exports to Central America
become duty-free immediately, including high quality cuts of beef,
cotton, wheat, soybeans, key fruits and vegetables, processed food
products, and wine, among others.

· Tariffs on most U.S. farm products will be phased out within
15 years. U.S. farm products that will benefit from improved market
access include pork, beef, poultry, rice, fruits and vegetables, corn,
processed products and dairy products.

· U.S. farmers and ranchers will have access to Central American
countries that is generally better than suppliers in Canada, Europe and
South America.

· The U.S. and Central America are working to resolve sanitary
and phytosanitary barriers to agricultural trade, in particular
problems and delays in food inspection procedures for meat and poultry.
Central America ismoving toward recognizing export eligibility for all
plants inspected under the U.S. food safety and inspection system.

Container
truck gets a washing outside new
lab to eliminate any diseases before hitting the highway.

Ministerio
de Agricultura y
Ganadería photo

New
lab in Caldera cutsdown testing time for boats

For the CAFTA Report

(Agu. 19, 2008) Every product of vegetable or animal origin that enters
the country
must be checked to make sure there are no diseases or insects. Until
recently the only government lab capable of doing those tests was at
Juan Santamaría airport.

Now the Ministerio de Agricultura y Ganadería has opened a lab
in Caldera where most of the grain carriers and other ships dock. In
the past, the unloading was delayed 24 hours until samples could be
taken to the lab near the airport. That could cost boat operators up to
$80,000 a day, said the ministry.

The ministry reported Monday that the new lab has had a test run since
January and has handled 800 samples of beans, corn, wheat and
other products. During that time technicians have discovered 12 suspect
shipments, they said. The lab was put together with the help of the
various organizations that use the port, the ministry said.

Now technicians are gearing up for heavy shipments of fruits that is
typical of the upcoming holiday season, they said.